China crisis persists; industry output growth dips to 6% in April from 6.8% in March

Industrial output rose 6.0 per cent year-on-year in April, the National Bureau of Statistics said, down from a 6.8 per cent jump in March. The Chinese economy grew at its slowest quarterly pace in seven years in the first three months of the year, but the figure met market expectations and raised hopes it has started to improve. Policymakers are seeking to wean China away from cheap exports and government-led investment to rely on domestic consumers as the key driver for growth in the world’s most populous country.

Separately, retail sales — an indicator of domestic consumption — rose 10.1 per cent on the year in April, the bureau said, weaker than the 10.5 per cent gain in March. Fixed asset investment, a gauge of government spending, rose 10.5 per cent in the January-April period, it said. That was slower than the 10.7 per cent rise in the first three months of the year.

Chinese officials say they are willing to accept slower growth to carry out structural reforms to retool the economy. The People’s Daily newspaper, considered to be the mouthpiece of the ruling Communist Party, on Monday quoted a source as sounding a warning over using credit to drive growth.

China was likely to have an “L-shaped” growth pattern, suggesting it will remain flat, the “authoritative person” said. The Asian giant’s economy grew 6.9 per cent for all of last year, its weakest in a quarter of a century. Premier Li Keqiang in March set a growth target in a range of 6.5-7.0 per cent for 2016. 

Meanwhile, Japanese Prime Minister Shinzo Abe plans to postpone a sales tax hike a second time, judging that boosting the tariff could hurt the world’s third-largest economy, a newspaper said on Saturday. Abe has already informed senior government officials he plans delay the consumption tax hike, scheduled for next April, that would raise levy from eight to 10 per cent, the Nikkei business daily said.

The last such rise, in April 2014 — the nation’s first in 17 years — was blamed for pushing Japan into recession. eadly earthquakes that hit southwestern Japan last month have already put the brakes on the economy, while a rise in the yen has threatened to squeeze exporters’ profits.

It is still unclear how long Abe, who first postponed the tax increase in November 2014, wants to put off the hike this time. The premier may announce the delay on June 1, when he hold a news conference to mark the close of the current parliament session, and after he hosts a Group of Seven summit in Japan this month, the Nikkei said.

Postponing the hike would require legislation to be passed. Critics say that Japan must increase tax revenues in the face of soaring debts and to pay for the ballooning cost of welfare as the population ages. Government coffers are deep in the red, with public debt standing at twice the size of the economy — the worst among industrialised economies.

Meanwhile, the China-led Asian Infrastructure Investment Bank (AIIB) in which India is a founding member will hold its first annual meeting of its board of governors at Beijing on June 25 in which the admission of new members is expected to be discussed. Governors and representatives from the bank’s 57 members, along with invited observers from the international partners will take part in the two-day meeting, the bank said in a statement.

While the bank did not offer details on the meeting, the South China Morning Post quoted its president Jin Liqun as saying in Hong Kong last month that the board would meet to discuss new membership in June. Jin expected the AIIB could have an asset portfolio of $1.5 billion in the first year and potentially reach around USD four to five billion of lending after five years, the Post reported.

Asian Infrastructure Investment Bank and World Bank reached a deal on joint projects, as China-led lender prepares to approve $1.2 billion of funds this year.